High Cost Of State Pensions Bankrupting The State

Legislation takes first steps toward pension options

April 4, 2011

Advocating on behalf of overburden taxpayers, Assemblyman Michael Fitzpatrick (R,C,I-Smithtown) has introduced legislation that would put the state on a path to financial reform, specifically targeting the state pension system and the political class that controls it. Assembly Bill 5141 seeks to prevent the state from going bankrupt by creating a new 401(k) Defined Contribution Plan for all elected officials and non-civil service appointees.

“As we stand here in New York, pensions are overly lavish and bankrupting the state,” said Assemblyman Fitzpatrick. “Every year, the amount contributed to these pensions is increasing at a rate that no taxation can cover. Each level of state employment, from schools to counties, has seen record contribution increases. This is the problem with the pension system, unsustainable contribution growth by the employer to a point of near bankruptcy.”

“It is time that elected officials start to remember that they took office to address the needs of the people they represent, not for the perk of receiving a state pension,” said Assemblyman Fitzpatrick. “The long-term spending reforms needed with the pension system will only be addressed if those who benefit from its excess are removed from it. Therefore, I am proposing to eliminate the defined benefit package for the political class. Not only would this create real progress toward overall pension reform, but it would allow for the reprioritization of funding currently being used to pay hefty public employee pensions.”

Fitzpatrick noted that in 1999, contributions from counties into the New York State and Local Employees Retirement System (NYSERS) stood at $71.8 million. In 2008, the total contribution stood at $422.2 million. That is a total increase of $350.4 million and a staggering 488 percent. Additionally, schools saw an average increased contribution from $24.2 million in 1999 to $276.9 million in 2008. That is an unsustainable 1,044 percent increase in contributions, totaling $252.7 million. On average, employer’s contribution rates for NYSERS, as a percentage of payroll, grew from 1.2 percent in 2002 and is forecasted to reach 16.3 percent in 2012.

“There are a number of issues that each state faces as part of their struggle to stay financially afloat, but in New York, pensions are a top issue,” said Assemblyman Fitzpatrick. “With cities, towns, and villages seeing their state funding decreased and retirement contributions increasing, it is no surprise that we see programs being cut. It is time for New York to take responsibility for the skyrocketing costs of pensions by leading through example. By removing outside influences to the political class, we start taking strides toward a financially responsible future.”

Fitzpatrick’s legislation seeks to freeze current state benefits for elected officials and political appointees while beginning their contributions toward a new Defined Contribution Plan. The plan will allow the comptroller to select one or more financial organizations to administer savings and invest the funds held in the Defined Contribution Plan. An employer contribution of 3% would be made into each participant’s account. The bill is currently in the Governmental Employees Committee where it awaits further action.